AUD range-bound as eyes turn to all important RBA policy update
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Daily Currency Update
The Australian dollar advanced on Monday, a mostly tepid trading day, as investors sidelined major moves amid a lack of headline news and top-tier macroeconomic data. The AUD found support through the domestic session, edging back above US$0.64, as markets reacted to Moody’s downgrading of the US government's credit rating and a surprise uptick in China's industrial production through April.Marking session highs above US$0.6460, the AUD opens this morning above US$0.6450, as attentions turn to the RBA rate meeting. We expect policymakers to deliver a 25-basis point rate cut, where some market analysts are pricing a larger 50-basis point adjustment. The deterioration in the global economic backdrop is expected to weigh on growth and inflation forecasts through the months ahead, supporting those suggesting the RBA should move more quickly in loosening the monetary policy reins.
The RBA’s statement of monetary policy and comments made in the press conference following the rate announcement will be key in shaping rate expectations and direction.
Key Movers
Price action across major currencies was languid through trade on Monday amid an absence of topline data and headline news flow. The US dollar fell during early Australasian trade as markets responded to Moody’s downgrading of the US government credit rating. A risk-off tone forced the USD lower, allowing commodity currencies to advance. With the DXY on the back foot, risk sentiment rebounded overnight, enabling the dollar to recover losses and bounce off session lows.Comments from Fed officials that suggested a rate cut may not be offered until September did little to move markets, while a trade deal between the EU and UK helped prop up both the euro and pound. EU officials consented to reduce obstacles for UK food exports in exchange for an extension of access to UK fishing waters. Additionally, they agreed to facilitate EU defence spending with UK manufacturers, a significant concession because negotiations between Trump, Zelenskyy, and Putin appeared to go nowhere on Monday.
The euro pushed back above 1.12, marking session highs at 1.1280 before settling near 1.1230, while the GBP edged higher. We look now to Canadian inflation data as the only macroeconomic item of consequence, with trade and geopolitical talks continuing to dominate risk sentiment and underlying direction.
Expected Ranges
- AUD/USD: 0.6350 - 0.6500 ▲
- AUD/EUR: 0.5700 - 0.5800 ▲
- GBP/AUD: 2.0500 - 2.0800 ▼
- AUD/NZD: 1.0850 - 1.0950 ▼
- AUD/CAD: 0.8920 - 0.9020 ▲